An historic action: Advocates applaud Biden announcement on student debt relief
Many human needs advocates are applauding President Biden’s decision this week to forgive up to $20,000 in student debt – an executive order that would completely wipe out student debt for 20 million Americans.
Biden’s order appears carefully tailored to target those who need the most help. His action would provide up to $10,000 in relief for all holders of student debt, and up to $20,000 for Pell Grant recipients, a majority of whom are people of color, veterans, or were first-generation college enrollees. Only individuals who earn less than $125,000 or couples earning less than $250,000 a year would qualify for either level of loan forgiveness.
The Biden Administration estimates that 90 percent of relief would go to people earning less than $75,000. Of people holding student loan debt, an estimated 53 percent owe $20,000 or less; 33 percent owe $10,000 or less.
Although Biden’s executive order may be challenged in court, there is no doubt of its historic nature. “The announcement was the culmination of years of activism that pushed what was once a fringe idea into the mainstream, onto political agendas and now into actual policy,” reports the Washington Post.
Advocates – some of whom wanted the Biden Administration to go even farther and excuse $50,000 in debt if not all debt whatsoever – nonetheless agreed.
“Today’s debt cancellation will provide life-changing relief to tens of millions of borrowers who will sleep a little easier tonight and wake up with more freedom to change jobs or start a business and more ability to provide for their families,” said Dr. Rakeen Mabud, Chief Economist and Managing Director of the Groundwork Collaborative, a progressive think tank. “Not only does this action begin to address the student debt crisis, it also sets an important precedent that the government can – and should – intervene to fix the important systems that hold people back.”
AFSCME President Lee Saunders issued a statement in which he said, “Now working people are finally catching a break.”
“Today’s historic action puts money back into working people’s pockets and frees thousands of families from crippling debt,” he said. “It builds on relief already delivered through the Public Service Loan Forgiveness Program, which has already lifted a burden for 160,000 public service workers across the country.”
“America’s educators thank President Biden for keeping his campaign promise and taking this bold, life-changing action on behalf of the 48 million student borrowers in America,” said Becky Pringle, President of the National Education Association. “The additional relief for Pell Grant recipients ensures equity, and that the borrowers with the greatest need are not left behind.”
Maya Wiley, President and CEO of the Leadership Conference on Civil and Human Rights also welcomed President Biden’s decision.
“If education is the path to the American dream of prosperity, student debt is the nightmare that blocks that path,” she said. “For too many – especially borrowers of color and Black women – student debt makes it hard to get ahead and make ends meet. It can also make it more difficult to get a home mortgage or loans to start a business, both of which reduce wealth-building opportunities and contributions to the economy.”
But Wiley expressed concern about a provision in Biden’s order that requires debt holders to prove their income level, warning that it would “shut out the most marginalized borrowers and blunt the greatest benefits of this policy.”
“This needs to be easy, not hard,” she said. “In order to benefit the students of color who are most impacted, the Administration must raise the canceled amount to maximize relief, create an automatic process that will be easy for students to navigate, and take further action to protect former, current, and future students from the harms of our debt-financed system of higher education.”
Biden’s order was notable for several reasons, beyond his decision to forgive $10,000 in debt, or $20,000 for Pell Grant recipients.
First, he extended the grace period that has been in place since near the beginning of the pandemic – the moratorium on making loan payments had been set to expire at the end of August, but now borrowers will not have to resume payments for another four months – until after December 31. Second, he has proposed creating a new income-based repayment plan to lower monthly bills for undergraduate borrowers – he would cap monthly payments for these loans at 5 percent of an individual’s discretionary income instead of the current 10 percent. Third, he would forgive balances after 10 years instead of the current 20 years.
Some have criticized the Biden plan for targeting relief to people on the road to wealth while ignoring the needs of workers with lower incomes. However, a substantial number of people saddled with student loan debt have not gotten degrees.
About four in ten borrowers who enrolled in four-year institutions in 2013 did not graduate within six years, according to the National Center for Education Statistics – and for students enrolling in private, for-profit institutions, the rate was even higher, three out of every four borrowers. Many of these borrowers now face a double whammy – they don’t enjoy the earning power that a college diploma confers, yet they are saddled with thousands of dollars of debt.
The Biden order will help people who have managed to make it into the middle class stay there, at a time when high costs for housing and other basic needs are straining their budgets.
That very help is a source of some objections to the plan. The extent to which reduced debt gives people more disposable income is claimed to be inflationary. But many have pushed back on the inflation argument. Paul Krugman in The New York Times pointed out that the amount of debt forgiven will amount to “…tens of billions a year in a $25 trillion economy. That’s basically a rounding error.” Also, earlier this week, the Center for American Progress released a paper in which it argued that student debt relief not only would not contribute to inflation, but is actually disinflationary.
“Moody’s Analytics finds that targeted student debt cancellation – when pursued with a restart in loan repayments at some stage – is disinflationary,” write authors Rose Khatter and Zahir Rasheed. “In fact, any marginal impacts on inflation from targeted student debt cancellation – which will be offset when student loan repayments eventually recommence – should not be an excuse to forgo pursuing a critical measure that helps millions of Americans.”